First Time Homebuyer s Guide from SunTrust Mortgage, Inc.

First Time Homebuyer s Guide from SunTrust Mortgage, Inc.

Advantages of Homeownership A home is an investment which can appreciate (increase in value) over time Many homeowners realize significant tax benefits from homeownership* Principal and interest payments stay the same on most mortgage loans for the life of the loan, unlike rent payments which may increase A home is a place to call your own *Consult your tax advisor

Disadvantages of Homeownership You are responsible for all repairs and maintenance of your home There are no guarantees that a home will appreciate in value If you move frequently, owning a home may be more of a burden If you do not keep up with your mortgage payments, the mortgage lender could foreclose on your mortgage, meaning you could lose your home

How Much Can You Afford? Your borrowing power ultimately depends on two things: How much you have available for the down payment and closing costs How much a financial institution will agree to lend you

Borrowing Power Down Payment Many mortgage loan programs require a borrower to make a down payment from their own cash when purchasing a home. Down payment size determines mortgage loan amount: $200,000 Purchase Price - 6,000 3% Down Payment $194,000 Mortgage Loan Amount Type of loan program determines required down payment amount

Borrowing Power Closing Costs Homebuyers usually pay other costs associated with the closing of their loan. Average costs are between 4% and 10% of the mortgage amount Geography plays a major role in determining closing costs Typical closing costs may include loan origination fee, appraisal fee, credit report, flood certification fee, attorney s fee, state tax, title insurance, and document preparation fees There may be third party fees charged for things like surveys, inspections, title insurance and settlement services

Borrowing Power Your lender will consider two primary factors in determining how large a loan to grant you: Your earnings Your existing debt

Borrowing Power Ways to increase your borrowing power: Reduce your existing long-term debt Improve your credit score Apply for a mortgage when your income increases Find a financing option that results in a lower down payment and a lower monthly mortgage payment If you are a low-to-moderate income homebuyer, ask your loan officer about special programs that provide grants to reduce the amount you would need to borrow.

Types of Mortgage Loans There are many types of mortgage loans. Your loan officer will help you determine which is the best for your individual situation. Fixed Rate versus Adjustable Rate* 15-year, 20-year, 30-year, and 40-year repayment terms Fully Amortized versus Interest Only** Be sure to understand the differences and how they may impact your monthly expenses during your repayment period. *ARM products have interest rates which are subject to increase after consummation. **Monthly payments of interest only will not reduce the principal owed.

Buying a Home The steps to getting a mortgage loan for your new home: Pre-qualifying Applying Processing Closing

Buying a Home Pre-Qualifying What is a pre-qualification? An informal way to determine how much you may be able to borrow for the purchase of your new home Can be completed over the phone with no paperwork Required information includes income, revolving and installment debts, and available cash for closing Receive a pre-qualification letter indicating the terms for which you currently qualify Real estate agents appreciate homebuyers who submit offers on their homes with a pre-qualification letter in hand!

Buying a Home Applying for a Loan What happens during loan application? Your loan officer will help you choose a loan program and will lock-in the current interest rate for that particular product You will sign forms authorizing your mortgage lender to verify information such as employment, account balances, rental payment history, and other credit references You will pay for your credit report and property appraisal Your lender will provide you with certain disclosures about your loan, such as the Good Faith Estimate, the Truth in Lending Statement, etc. Be sure to ask your loan officer about anything you don t understand!

Buying a Home Processing the Loan What s next? A mortgage loan coordinator will be assigned to assist with the processing of your loan and will be your main contact during this phase Your credit report and appraisal will be ordered, and the verification request forms will be sent You may be requested to provide additional explanation or documentation not collected at application You will be notified in writing of the final decision on your loan During this time, you should choose the settlement agent or attorney who will handle your loan closing. You should also make arrangements to obtain your homeowner s hazard insurance.

Buying a Home Closing the Loan How should I prepare? Prior to closing, your settlement agent or attorney will notify you of the amount of cash you will need to bring to closing; you will need to bring these funds in the form of a cashier s or certified check Closing usually takes place in the office of the settlement agent or attorney, where they will review and explain all of the final documents before you sign them You will receive copies of the closing forms and the keys to your new home Congratulations, you re a homeowner! There are many forms that you are asked to sign and understand at closing. The more familiar you are with these forms, the more comfortable you will be on the day of closing. Ask questions!

Homeownership Responsibilities Components of your monthly mortgage payment: Principal a repayment of a portion of the amount you borrowed Interest fee that you pay the lender for using their money Escrow additional amount that covers your real estate taxes, homeowner s hazard insurance, flood insurance and mortgage insurance; your lender holds these amounts and pays the bills when they come due Principal and interest are referred to as P&I. When taxes and insurance are included, it is referred to as PITI.

Homeownership Responsibilities Understanding your obligations as a borrower: Your mortgage payment is due on the first day of each month If you choose not to sign up for automatic monthly deductions, you will receive monthly billing statements after loan closing A First Payment Letter will be included in your settlement package in the unlikely event that your first monthly billing statement doesn t arrive prior to your first payment being due Making this obligation a priority can help you avoid costly late charges and maintain a good credit history.

Mortgage Glossary Glossary of loan terms Adjustable Rate Mortgage (ARM): A mortgage in which the interest rate is adjusted up or down periodically based on a pre-selected index; also known as a re-negotiable rate mortgage or a variable rate mortgage. ARM products have interest rates that may increase after consummation. Amortization: Repayment of mortgage debt with equal periodic payments of both principal and interest, calculated to pay off the loan obligation at the end of a fixed period of time. Appraisal: A formal written estimate of the current market value of a home and land. It also refers to the process by which a value estimate is obtained. Balloon: A short-term loan with monthly payments, not high enough to pay off entire loan debt, followed by a single balloon or lump-sum payment at the end of the loan term to pay off the remaining principal balance. Closing (Settlement): The delivery of a Deed, financial adjustments, the signing of the Note, and the Mortgage or Deed of Trust, followed by the disbursement of funds necessary to complete the sale or loan transaction. Closing Costs: Fees paid for the closing of a loan, such as origination fee, discount points, title, insurance fees, survey fees, and attorney s fees. Credit Report: A report to a prospective lender on the credit standing of a prospective borrower, used to determine creditworthiness. Delinquency: Failure of a borrower to make timely payments under a loan agreement. Discount Points: A one-time charge imposed by the lender to lower the rate at which the lender would otherwise offer the loan. Each point is equal to one percent (1%) of the mortgage amount. Down Payment: The difference between the sales price of real estate and the mortgage amount.

Mortgage Glossary continued Equity: The difference between the current market value of a property and the amount of a homeowner s outstanding mortgage loan debt. Fixed Rate: A mortgage with an interest rate that remains the same for the term of the loan. Monthly principal and interest payments are also fixed at one amount. Foreclosure: A procedure in which a mortgaged property is sold to pay the outstanding debt in case of default. Good Faith Estimate: An estimate of the closing costs given to the borrower within three (3) business days after the lender receives a completed loan application. Homeowner s Hazard Insurance: A policy insuring against multiple perils, commonly called a package policy, and made available to owners of private dwellings. There are wide variations in the coverage of such policies, which generally insure the dwelling and its contents. Interest Only: A loan option that allows a borrower to make payments of mortgage interest, instead of both principal and interest, during a set period of time. Monthly payments of interest only will not reduce the principal owed. Mortgage: A legal document that pledges a property to the lender as security for payment of a debt. Mortgage Insurance: A policy that allows mortgage lenders to recover part of their financial losses if a borrower defaults on a loan. Origination Fee: The lender s fee charged to a borrower to prepare documents, make credit checks, inspect, and sometimes appraise a property. Usually this is equal to one percent of the loan amount. Truth in Lending Act (TILA): A federal statute that requires the disclosure of the Annual Percentage Rate to homebuy-ers shortly after they apply for a loan. The actual disclosure form is sometimes referred to as the TIL.

Conclusion At SunTrust Mortgage, we are committed to providing you with excellent service quality. Should you have additional questions regarding any of the information included in this presentation, your SunTrust Mortgage loan officer will be more than happy to assist you.